Joeri de Wilde: Hidden fault lines in the global economy
Joeri de Wilde: Hidden fault lines in the global economy
This column was originally written in Dutch. This is an English translation.
By Joeri de Wilde, Senior Economist at Triodos Investment Management
The economic growth and stock market rally of 2025 give the impression that the global economy is resilient. Yet beneath this apparent success lie fault lines that long-term investors cannot afford to ignore.
‘It could have been much worse.’ This somewhat resigned observation dominates many economic retrospectives on 2025. Despite wars, geopolitical tensions and political uncertainty, the global economy grew by over 3 per cent and equity markets reached new record highs. From a returns perspective, this appears to point to robustness.
Yet something does not sit right. Beneath the apparent resilience lies a tension that is not visible in the figures, but which is nevertheless decisive for the economy and financial markets, especially over the longer term.
Fragmentation beneath the surface
The new ‘Geopolitical Mood Index’ published by the Financial Times makes part of this tension visible. An analysis of decades of news coverage reveals two structural breaking points: after 2001, in the aftermath of 11 September, and from 2018 onwards during Donald Trump’s first term. In that latter period, trade barriers increased and multilateral institutions were openly undermined, permanently eroding international trust. Over the past year this second phase has not reversed, but deepened. With Trump once again disrupting the global order, geopolitical uncertainty remained a structural factor.
Research by Allianz Research shows how this uncertainty translates into economic reality. Although global trade volumes still grew this year, their composition is changing rapidly. Since 2022, trade between geopolitically aligned countries has increased, while trade flows between geopolitical rivals have declined. This friendshoring dynamic is producing a world that is fragmenting into competing trade blocs. While exposure to hostile regimes is reduced, this fragmentation comes at the expense of efficiency, economies of scale and productivity growth.
For long-term investors, this implies structurally lower economic growth potential. Moreover, geopolitical fragmentation hampers international cooperation on critical issues such as climate change. The less cooperation there is, the smaller the chance that global warming will be limited to 2 degrees, and the greater the climate risks faced by investors.
Inequality as a systemic risk
The recently published 'World Inequality Report' reveals a second tension that is at least as relevant: rising concentration of wealth. Since the 1990s, the wealth of the richest people in the world has grown by around 8 per cent per year, almost twice as fast as that of the bottom half of the population.
Long-term investors should not view this merely as a moral issue of distribution, but also, and perhaps above all, as a systemic risk. In the United States, almost half of total consumption can now be attributed to the top 10 per cent of households by income, the highest share since measurements began in 1989. Economic growth is therefore increasingly driven by a small group of wealthy consumers. This feeds growing social discontent and the rise of populism, putting pressure on the democratic rule of law.
The concentration of wealth is also accompanied by increasing concentration of power among a small number of dominant technology companies. The political influence of tech figures such as Elon Musk and Mark Zuckerberg is growing, leading to deregulation and further pressure on the democratic rule of law.
For financial markets, this is problematic. Well-functioning markets cannot exist without a number of essential preconditions: a liveable planet, a degree of social cohesion, and independent institutions. When these conditions are eroded, long-term risks for investors increase.
European counterforce
Against this backdrop, it is encouraging that some European institutional investors recognise these underlying tensions and are increasingly focusing on sustainable investing. For example, two large Dutch pension funds terminated their mandates with BlackRock this year due to concerns about weakening sustainability ambitions at the American asset manager. This points to a growing awareness that long-term risks such as climate change and social instability do not disappear when ignored, but instead become more severe.
This is precisely where the scope for action lies for long-term investors in 2026. Those who recognise and take these underlying tensions seriously in time will not be caught off guard, and can actively contribute to preserving the essential preconditions for financial markets.